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Invista Real Estate Investment Management has become the latest casualty of a faltering UK property market after its assets under management fell by Â£600m (â¬839.4m) since the summer and it warned of a further drop of up to Â£1.1bn.

Total assets under management fell from £10.2bn to £9.6bn in the four months to the end of October. Invista said it expects outflows from its two with-profits funds in December, and it expects total assets to fall to between £8.5bn and £9bn by the end of the year. With-profits funds aim to smooth out fund returns by hiving off returns from good years as reserves, and using these to prop up returns in bad investment years.

However, Invista said the diversification of its business and the timing of expected fund outflows would keep its revenue and profitability for the year in line with expectations.

It said: "the improving mix of funds under management is expected to continue to have a beneficial impact on profitability in 2008 and beyond, notwithstanding the anticipated lower level of assets under management at the year end."

Paul Murphy, investor relations representative at Invista, said around £300m of the £600m fall in assets under management was due to a fall in UK property values from late August.

He said: "The market is very tricky to call at the moment. There is a lack of transactions, but valuers believe that values have fallen, and we expect values to fall a but more by the end of the year."

Invista predicts in its trading statement that by the end of the year, commercial property values in the UK will have fallen by around 10% since June. The forecast follows comments by Robert Peto, chairman of the Royal Institution of Chartered Surveyors' valuation faculty, who said earlier this month that UK property valuations struck in the three months to September were 10% too high on average.

Net outflows from Invista's funds in the four months to the end of October amounted to £301m, primarily due to the sale of the £278m Westbury Property Fund. Other net outflows included £16m from open ended funds, which had seen net inflows of £488m in the first half of the year.

The firm blamed an uncertain UK property market for the reversal in its growth. "The outlook for the commercial property sector is uncertain because the sector is going through a difficult period, with very little market activity on which to base definitive trends," it said in its statement.

However, the firm is more positive about the European property markets, citing robust valuations compared to UK markets. It launched two European funds in October, and currently has €1bn invested on the continent.